PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS

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1 PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS Interest and investment in using programmatic advertising to reserve or guarantee digital display ad inventory is growing, as both publishers and media buyers see promise in automating the sales process and bringing audience insight to upfront buys. This report is available to attendees of Programmatic Summit in partnership with:

2 Dear Attendee, emarketer is pleased to make a copy of our report, Programmatic Guaranteed: Meaningful Momentum, Despite Murky Industry Definitions, available to you. This report is just a small sample of the research emarketer publishes about programmatic advertising and other research topics we cover. Other 2014 reports available to emarketer corporate customers focused on programmatic include: Programmatic Video Advertising: Automated Platforms Begin to Transform Digital s Premium Marketplace Programmatic Advertising in Canada: Programmatic Direct Far Outpaces Real-Time Bidding Driving Programmatic Buying: Automotive Industry Will Invest Big in 2014 Programmatic TV Coming Soon CPG and Programmatic Ad Buying Coming Soon Programmatic Spending Forecast Coming Soon We invite you to learn more about why an emarketer corporate subscription is the go-to industry-standard resource for the world s leading agencies, publishers and brands. Best, David Iankelevich Vice President, Marketing emarketer, Inc. 11 Times Square, Floor 14 New York, NY sales@emarketer.com

3 EXECUTIVE SUMMARY It s hard to ignore the enthusiasm for programmatic display advertising an automated, technology-driven method of buying and selling digital display ads which seems to be on everyone s roadmaps. Initially, the industry focused on real-time bidding (RTB) and its impression-level, auction-based buying function. But as more brand dollars move to digital, both publishers and media buyers look to programmatic technology to lock in advertising agreements in advance, bypassing traditional direct sales channels. Known as programmatic guaranteed or programmatic reserved for the ability to secure upfront commitments to both price and amount of inventory, this branch of programmatic direct is gaining significant traction among publishers and media buyers looking to automate the often lengthy insertion order (IO) process and bring greater audience insight to their premium ad buys. But in spite of its momentum, many do not have a clear idea of what programmatic guaranteed is. This report will define programmatic guaranteed and explore both publishers and media buyers interest in it. It will also discuss programmatic guaranteed in the broader media-buying context to understand where future growth is likely to occur. KEY QUESTIONS What is programmatic guaranteed? How is programmatic guaranteed growing in use and adoption? How are publishers and media buyers using it? How does programmatic guaranteed fit in a broader media-buying context? US Premium Programmatic* Digital Display Ad Spending, by Channel, 2014 & 2018 millions $77.1 $674.9 $511.8 $ CONTENTS 2 Executive Summary 3 Defining Programmatic Direct and Programmatic Guaranteed 4 Programmatic Momentum 6 Publishers and Workflow Automation 7 Media Buyers and Audience Intelligence 10 Opportunity Within the Broader Ad-Buying Ecosystem 12 Understanding Programmatic Advertising in Three Easy Steps 13 emarketer Interviews 14 Related emarketer Reports 14 Related Links 14 Editorial and Production Contributors $9,369.3 $3,599.5 $1,775.4 $3, Online display Online video Mobile display and video Note: numbers may not add up to total due to rounding; *includes all digital display ad spending on upfront, programmatic direct deals secured using pre-existing, real-time bidding (RTB) technology infrastructure Source: International Data Corporation (IDC), "Forward Markets : Moving Direct Display Ad Sales onto the RTB Platform" sponsored by The Trade Desk, March PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 3

4 DEFINING PROGRAMMATIC DIRECT AND PROGRAMMATIC GUARANTEED Interviews with industry professionals revealed two noteworthy findings. First, interest and investment in using programmatic to secure upfront display ad commitments is real and growing. Second, in spite of such momentum, there is significant confusion and conflation of terms associated with this branch of programmatic. What follows is a comprehensive definition of programmatic guaranteed. As noted in emarketer s November 2013 report, Programmatic Advertising: Forecast and Future Growth Factors, there are two main branches of programmatic advertising. The first is the auction-based arm known as real-time bidding (RTB), an automated method of buying and selling impression-level inventory at auction, in real time. The second branch of automation, known as programmatic direct, uses the same application program interface (API) technology as RTB, but it enables buyers and sellers to negotiate ad sales directly, bypassing the auction. Such commitments always include a fixed CPM impression price, but they can be for either unreserved amounts of inventory (known as preferred deals or private access), or reserved amounts of inventory (known as programmatic guaranteed). What Is Programmatic Guaranteed? emarketer defines programmatic guaranteed as a type of programmatic direct transaction that guarantees both CPM price and inventory commitment. Programmatic guaranteed is often synonymous with programmatic reserved, forward market and upfronts, three other terms that are commonly used to describe the process of automating an advertising guarantee. Many in the industry today also use the terms programmatic premium and programmatic direct interchangeably with programmatic guaranteed, but there are distinct differences. Programmatic premium, for example, does little to describe the method of transacting it only describes the type of inventory being bought. And, as the above definition indicates, not all programmatic direct transactions are guarantees. This is an important distinction to make, since this report will focus on programmatic guaranteed. See Understanding Programmatic Advertising in Three Easy Steps at the end of this report for a clear depiction and understanding of all four main branches of programmatic advertising. Today, there are two methods of automating programmatic guarantees. As described earlier, the first is through the use of pre-existing RTB-based APIs with the capacity to bypass the auction and enable buyers and sellers to directly negotiate ad buys. However, interviews with a host of industry professionals indicated that this definition might be too narrow. Some argue that programmatic direct and therefore, programmatic guaranteed can encompass the use of any API-driven method of securing digital display inventory. In some instances, the API is a proprietary one to the publisher. In others, publishers look to publisher-enablement tools such as isocket, Shiny Ads or Adslot that integrate with the publisher s ad server in order to open up their inventory programmatically to buyers. Both types of APIs enable publishers and media buyers to automate the often cumbersome IO process, but many of the publisher APIs do only that. Without direct integration into key systems such as a demand-side platform (DSP) or data-management platform (DMP), which RTB-based pipes have, buyers are unable to use their own audience data, dynamic creative or other common benefits of RTB-based buying in real time. Arguing against those who say programmatic encompasses any type of automation are those who believe that to really be considered programmatic, the technology must allow media buyers and publishers to tap into other tools and technologies that have become critical components of the digital display advertising ecosystem, like a DMP. In this report, both methods of executing programmatic guarantees are discussed, offering a comprehensive illustration of the current landscape. Where possible, emarketer notes distinctions between the two. In looking ahead at the future of programmatic advertising, however, emarketer largely focuses on RTB-based programmatic guaranteed, given our assumption that ultimately, media buyers will seek to integrate auction-based RTB buys and upfronts for greater advertising intelligence and insight. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 4

5 PROGRAMMATIC MOMENTUM Today, billions of dollars are transacted programmatically. MAGNA GLOBAL estimates US digital display ad dollars spent via both RTB and direct programmatic methods will total $9.8 billion by year s end, growing to $16.9 billion by US Programmatic Display Ad Spending, billions and % change $ % $ % $ $ % 2014 Programmatic display ad spending $ % 2015 % change $ % 2016 $ % 2017 Note: includes both RTB and other programmatic/automated platforms for banner, social and video ads on desktop and mobile devices Source: MAGNA GLOBAL as cited in press release; emarketer calculations, Oct 14, Currently, RTB auctions account for the majority of US programmatic digital display ad dollars. emarketer estimates that RTB digital display ad spending in the US will total $4.86 billion this year, making up 22.0% of total display ad spending. By 2018, that amount will reach $12.02 billion and account for 29.5% of all US digital display ad spend. US Real-Time Bidding (RTB) Digital Display Ad Spending, billions, % change and % of total digital display ad spending 94.8% $ % % $ % % $ % 2014 $ % 25.0% 2015 $ % 28.0% 2016 $ % 19.1% 2017 RTB digital display ad spending % change % of total digital display ad spending Note: includes all display formats served to all devices Source: emarketer, March 2014 $ % 15.8% RTB continues to draw publishers looking to monetize unsold inventory and buyers hoping to pair first- and third-party audience data with more cost-efficient, impression-level inventory. Advertisers focused on branding might not partake in RTB-based auctions given the lack of guarantees on inventory pricing, amount and quality but they still recognize the buying efficiency and overall value RTB brings to digital advertising. As much as there is a desire for cheaper inventory in RTB, there s an even greater desire to enjoy the advantages of RTB, but in a guaranteed environment, said Ben Trenda, chief revenue officer at programmatic enablement solution provider isocket. That greater desire has led many to programmatic guaranteed a branch of programmatic advertising that marries the benefits of RTB-based optimizations with the assurance of upfronts and premium inventory. Direct-response, [RTB] exchange-bought media was the pilot phase, said Josh Jacobs, global CEO of Omnicom s agency trading desk, Accuen. But now we re ready for prime time, and programmatic premium is the way the industry is saying, We can add value to branding budgets. We can deliver campaigns across different screens and different devices. All of this points to a larger ability to apply data to media. The next round of innovation is expanding as fast as we can expand the media we can apply that data to. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 5

6 GROWTH OF PROGRAMMATIC GUARANTEED The amount of digital display ad dollars spent on programmatic guarantees is rising. A January 2014 survey from Digiday and The Trade Desk showed that nearly half of US digital media and marketing professionals planned to invest between 21% and 50% of their premium display ad dollars programmatically this year, up from 30.9% of respondents in In addition, nearly 20% reported plans to invest more than half of their budget programmatically this year. Percent of 2013 vs Programmatic Budget Spent on Premium Inventory According to US Digital Media and Marketing Professionals, Jan 2014 % of total %-10% 33.8% 13.6% 11%-20% 19.5% 18.8% 21%-30% 17.3% 23.9% 31%-40% 8.3% 13.6% 41%-50% 5.3% 10.2% 51%-60% 3.8% 5.7% 61%-70% 3.0% 5.1% 71%-80% 3.8% 2.8% 81%-90% 3.8% 5.7% 91%-100% 1.5% 0.6% Note: n=133 for 2013; n=176 for 2014 Source: Digiday and The Trade Desk, "The Future of the Programmatic Forward Market," Feb 20, Ryan Teshima-McCormick, senior manager of media strategy at DMP [x+1] said that he is already seeing advertisers increasingly expanding their programmatic tactics from efficiency-based buying to programmatic planning and partnerships with premium publishers. You re seeing contracts for six-figure commitments for buys that are more in line with pure branding objectives, he said. Dr. Mark Grether, global COO of Omnicom s agency trading desk Xaxis, noted a similar priority shift. In the past, most of our spend was RTB, and it s moving substantially toward programmatic direct, he said. Each month, you see more and more coming from our programmatic direct pipes. Recent headlines would suggest publishers are eager to meet buyers desires. Companies such as Google, Microsoft, AOL, NBC and The New York Times have all made the news for either interest or commitment to automating ad sales guarantees in this fashion. To identify the growth factors for programmatic guaranteed, this report explores how both publishers and media buyers view and use it today. It also looks ahead at where these automated upfronts will ultimately fit in terms of the broader media-buying landscape. But given the newness of programmatic guaranteed and the ambiguity of its definition, there is little on which to quantify investment at the moment. The International Data Corporation (IDC) is one of the few companies that have released estimates. It believes that today, just 2% of US premium digital display ad spend across banners, video and mobile, or $211.8 million, is transacted using programmatic guarantees made using RTB-based infrastructure. The March 2014 study noted that by 2018, however, that share will jump to 38%, or $9.4 billion. Even though the lion s share of media buying is still mostly IO-based, you re seeing more and more money transacting through programmatic pipes, said Jonathan Slavin, chief revenue officer at digital media company CPXi. A tsunami of money is going to hit the programmatic space, and that s going to force everyone to rethink their strategy of how buyers will connect with sellers. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 6

7 PUBLISHERS AND WORKFLOW AUTOMATION Even just a few months ago, the word programmatic likely conjured up images of RTB and remnant inventory. Though many publishers and media buyers for that matter still falsely conflate programmatic with auction-based buying, a growing number recognize its potential to automate their premium sales. Publishers are realizing that more and more of the buying structure is moving toward automation, Slavin said. And it s increasingly algorithmically based. So as more buying moves to automation, it becomes counterintuitive to hold back inventory from that process of automation. The smart publishers acknowledge that our landscape is changing. Market pressures aside, publishers recognize the benefits of using programmatic to bring much-needed efficiency to their own sales process and provide a richer, smarter advertising experience to buyers. In a February 2013 survey from Digiday and OpenX, the greatest portion of publishers in North America (68%) agreed that programmatic had the ability to improve on the cumbersome, lengthy IO process. Other benefits of programmatic to the sales process cited by respondents included billing and reconciliation (60%), optimization (59%) and trafficking (52%). On the publisher side, you hear the occasional story of Federated or Demand Media that basically fired their sales teams and said they were going to be all programmatic, which essentially means just exchanges, Trenda said. But we re seeing another angle to that trend, which is that most big publishers want to automate all the processes around sales and have salespeople play more of an educational or evangelical role. Publishers desire to automate the sales workflow process is hardly surprising when considering that IDC estimates that the average display transaction could include anywhere from 40 to 60 steps. What we re doing is offering advertisers the same inventory but in a much easier package, said Choon Choi, senior vice president of business development at Jumpstart Automotive Group, a division of Hearst Magazines that represents more than a dozen in-market automotive publishers. It s just another way for our sales team to sell. Choi noted this is especially valuable for industries with deep roots in annual upfronts, such as the auto industry. It offers a retention strategy, he said. If an OEM [original equipment manufacturer] wants to guarantee all of its new car make-and-model inventory for the following calendar year, it can easily do that. Ultimately, we see these [annual] upfronts happening in a much more automated fashion, and we think programmatic guaranteed is likely to be the way this happens. Not surprisingly, the Digiday/OpenX survey showed that behind pricing-related requirements, the greatest number of publishers said the ability to automate the transaction of terms, or IO process, was a leading requirement when choosing an ad server for programmatic enablement. Leading Requirements for Publishers in North America When Choosing an Ad Server to Engage in Programmatic Trading, Feb 2013 % of respondents Yield optimization 88% Reporting insights 87% Set price floors by buyer or segment 79% Transact directly with terms 76% Manage guaranteed and nonguaranteed 74% Content optimization 73% Sell inventory in real-time markets 68% Overlay audience data 67% Screen out certain buyers 58% Source: Digiday and OpenX, "Programmatic + Premium: Current Practices and Future Trends," March 27, Though publishers and media buyers are enthusiastic about automating the sales process, the parties have different perceptions about the value of bringing audience data into the programmatic equation. Just 67% of publishers in the study noted the ability to overlay audience data as a leading requirement. Yet if buyers were surveyed, a much larger percentage would surely demand such functionality. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 7

8 You ve got to be able to manage the data piece, said Esco Strong, director of programmatic advertising at Microsoft. You ve got to be able to forecast what type of inventory is going to be available and how that actually maps to the audience that the buyer is looking for. And you have to deliver that on a guaranteed basis with some pacing to it. Charles Gabriel, senior vice president of global video sales at AOL, said a number of video advertisers want to overlay their audience data with their buys. You re already seeing requests where a client says, Hey, can I just plug my DSP into your exchange so I can look at inventory? Why do they want to do this? Because from a reporting perspective, you have a better view of how your money is being used and whether you have an overlap in audience from one network vs. another. Shane Cunningham, global commercial director at Reuters, noted a similar trend. On the quality and premium side, we re seeing a move toward demanding specific audience fits or sections of specific sites that people will pay a premium for, he said. You ll start to see more publishers putting together these very premium marketplace segments. Though interest in bringing audience intelligence to programmatic guarantees is rising, many feel publishers are lacking in their ability to forecast against such audience guarantees. MEDIA BUYERS AND AUDIENCE INTELLIGENCE For media buyers engaging with dozens of publishers and platforms, the power to automate the IO process is important. But for buyers, the true value of programmatic guaranteed comes from the ability to marry that audience insight and intelligence with premium inventory. It s not just that we want to automate the integration, we also want to leverage data in the delivery, Accuen s Jacobs said. It s about buying the same pools of inventory but being able to use the data and technology that we have on the advertiser side to optimize delivery. We re now able to make the media work much harder. In a September 2013 survey of US executive marketers conducted by the Winterberry Group and Interactive Advertising Bureau (IAB), 91% planned to use some form of audience segmentation in their programmatic efforts during the next two years. Further, automating the purchasing process was important to 79% of respondents. Both the publishers and the SSPs [supply-side platforms] have to get better at forecasting, said Jeff Green, CEO of The Trade Desk. If I went to a publisher today and said I want to buy every Ohio voter for the 2016 election and I m willing to pay a $5,000 CPM, they would have no idea how to guarantee that. None of those problems get solved simply by order-taking or connecting the pipes between the advertiser and the publisher. However, many were optimistic that solutions were imminent. The technology will catch up, Slavin said. Most high-end publishers schedules are not filled up 30 days a month with homepage takeovers. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 8

9 Programmatic Approaches that US Executive Marketers Currently Use vs. Plan to Use*, Sep 2013 % of respondents Audience segmentation 79% Utilization of auction-based approaches to media buying (e.g., through a real-time bidding platform) Insight development Automation of back-end processes 59% 63% Automation of "premium" digital media buying processes Content optimization 47% 59% 69% Automation of traditional media buying processes (e.g., purchasing print advertising) Currently 22% 44% Next 2 years 79% 86% 88% 86% 79% 91% Note: *in the next 2 years Source: Winterberry Group and the Interactive Advertising Bureau (IAB), "Programmatic Everywhere? Data, Technology and the Future of Audience Engagement," Nov 4, It s very clear that advertisers are seeing value from leveraging their [first-party] data as well as third-party data in the RTB space, Microsoft s Strong said. So it s absolutely going to be a requirement in this guaranteed space for advertisers to be able to bring in their own data and use it to target users with the right ad. And the prospect of being able to do that with a reasonable forecast of availability and a guarantee of delivery against that audience is exciting for marketers. As Strong also noted, the value audience data brings to programmatic guaranteed is twofold. On one hand, it affords buyers the capabilities enjoyed in RTB: audience segmentation, targeting, frequency capping and even sequencing of creative based on prior user behaviors or exposures. But perhaps equally important, it provides buyers with a means to vet the value of a potential opportunity against an audience before actually committing to the buy. Programmatic reserve has brought about an awakening for our clients on the buy and the sell side, said Allie Kline, CMO of AOL Platforms. Both recognize that they need to focus on data because the element of reserving and deciding what to buy is largely driven by data. Joshua Koran, senior vice president of product management at Turn, a DSP, agreed with Kline. He noted that the ability to first check publisher inventory for audience fit doesn t just provide buyers with a more accurate picture of overall opportunity, it also has the potential to give publishers a reason to command higher CPMs. With upfronts, buyers have less information to make decisions, Koran said. How do they know what percentage of Yahoo Sports is a good audience fit? There s risk involved. But if the buyer can measure what percent of traffic would be useful, then they d be willing to pay more, because it reduces their waste and increases their ROI. To do so, most buyers rely on either first- or third-party behavioral data. The same Winterberry Group and IAB survey found that 78% of US executive marketers said first-party behavioral data was the most essential data type for supporting programmatic approaches, followed by third-party behavioral data, cited by 66% of respondents. Using first-party data to inform decisions is absolutely something that you want, said Tamara Bousquet, senior vice president of media and head of programmatic activation at digital ad agency DigitasLBi. It s the same whether you re talking about programmatic or traditional buying. But the programmatic layer allows us to take advantage of real-time insight and make decisions based on actual data vs. a panel that looks back 90 days. It allows us to be smarter and make sure we re able to have a one-to-one conversation at mass scale, because we re dynamic in our creative and our targeting choices. How buyers bring their data into those guarantees, however, is largely dictated by the API configuration offered by the publisher. RTB-based APIs give media buyers maximum control in allowing them to integrate directly with their own audience intelligence tools, like a DMP. With a direct integration, buyers can see right away the potential for audience overlap and overall audience opportunity. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 9

10 Guarantees made using publisher APIs can also take into account a buyer s audience, but the buyer must first export their audience data from their DMP into a cookie list or other data set and then send it to the publisher to vet for audience fit and overlap. Facebook Custom Audiences, for example, uses a publisher API to enable programmatic guarantees. You re getting exclusive access to inventory and Facebook data, but you don t get the same frequency-capping control or bringing-in-your-own-audience-to-the-table type of control that you d get with RTB, Koran said. He also noted that in instances where buyers are not able to integrate their DMP directly into the inventory reservation system, there can be a drop-off of 5% to 20% in terms of audience match. And during these campaigns, a lack of integration with the DMP means a lack of ability to optimize based on audience data and behaviors in real time. Mark Howard, chief revenue officer at Forbes Media, said that right now, the majority of programmatic direct deals Forbes has made have been with agency trading desks or DSPs responsible for large portfolios of buyers. In handling the buying for multiple clients, these larger entities can rotate advertisers into placements, based on audience insight. Based on our own data-management platform, we can decide which campaign to deliver, Xaxis Grether said. It s much more efficient than striking a new deal and setting up a new pipe for each and every single campaign. Certainly, the need for real-time audience optimization critical for lower-funnel, RTB-related tactics might not be as important to more branding-focused buyers simply looking to reserve inventory from a specific publisher. Lora Parker, general manager of the US for Dentsu s agency trading desk Amnet, said sometimes, clients looking for a programmatic guarantee simply have traditional branding-based objectives, such as 100% share of site. In these instances, she said it s less about the audience and more about the contextual fit. Even still, Amnet collects audience data throughout the campaign and enters it into its DMP to inform future buying strategies and audience segmentation practices. If someone clicked on an ad or watched a video, all of those can be data triggers within the bigger plan, Parker said. For publishers to guarantee upfront inventory amounts against a buyer s specific audience, it would likely require that audience to be massive. That s why many of the buyers most actively seeking audience guarantees are agencies and trading desks with an aggregate audience large enough to entice publishers to commit to such upfronts. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 10

11 OPPORTUNITY WITHIN THE BROADER AD-BUYING ECOSYSTEM To really understand the potential for future growth in programmatic guaranteed, it helps to look at this one branch of automation in the broader programmatic context. The Winterberry Group/IAB survey of US advertisers and publishers reinforced the importance of workflow and operational automation across all branches of programmatic both RTB and reserved. But what it also highlighted was advertisers recognition that effectively targeting consumers across digital media was a leading benefit of automation. Leading Objectives that Drive Interest in Programmatic Approaches According to US Publishers and Advertisers, Sep 2013 % of respondents Efficiently value and transact digital media Improve operational efficiency Expand yield from owned inventory More effectively target consumers across digital media Deliver a better customer experience Improve speed to market Improve relevance of marketing messaging Improve insights into consumers Publishers 63% 63% 61% 26% 16% 12% 9% 7% Advertisers 49% 33% 12% 55% 30% 9% 24% 21% Source: Winterberry Group and the Interactive Advertising Bureau (IAB), "Programmatic Everywhere? Data, Technology and the Future of Audience Engagement," Nov 4, The ability to look across hundreds of campaigns and be able to find similarities and different audiences and behaviors and engagement that s the kind of insights that are interesting to buyers, Howard said. Tom Shields, co-founder and chief strategy officer at yield management solution provider Yieldex, noted that it s common for marketers to want to classify buys into either branding or direct-response buckets. But in reality, most campaigns require a blend of both to meet goals. It s logical that buyers would look to combine their traditionally direct-response, RTB-based branch of programmatic with the more branding-based, upfront one. It s absolutely the case you want to have all of this buying in one place, Shields said. You want to manage it holistically. You want to have direct relationships with a number of publishers that you re doing high-quality brand work with, and you also want the ability to reach across the internet all from one platform. Media companies and publishers are recognizing the value of providing one platform through which buyers can engage in both the auction-based arm of programmatic and the upfront one. In March 2014, AOL announced the creation of AOL ONE, its platform designed to automate and align all buys across AOL properties including exchanges, sites and even Adap.tv pools of inventory. isocket s Trenda noted that already, some of the holding companies are looking to automate guarantees in order to share audience information across all programmatic buys. One benefit to doing so, he said, is the ability to control exposure frequency across both guaranteed and exchange-based buys. For example, if an advertiser messaged an individual 10 times on a guaranteed placement, that user would be opted out of any additional targeting on the exchanges. The opposite scenario could also apply. Brands are asking for solutions that unify all digital media, including reserved and nonreserved placements, with data and analytics, said Doug Boccia, vice president of platform solutions at AOL Platforms. Those walls that existed where people bought in siloes are quickly disappearing. Microsoft is also trying to help buyers meet all campaign objectives programmatically. Strong said that within Microsoft s platform, buyers can decide whether they want to take an RTB-, auction-based approach or a more direct one. Buyers can say either, Yeah, I m going to buy some inventory on the spot market at auction, or they can buy some reserved inventory with guaranteed delivery, Strong said. Those two things are complimentary, and they can be managed in a unified way and planned in a unified way. We think that s really the goal we should be driving toward to deliver on marketer goals. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 11

12 Given the early promise of aligning both the auctioned and guaranteed branches of programmatic in one platform, one can expect to see additional integrations surface. But such integrations should do more than bring together these two main arms of programmatic: They will likely bring about the automation of more cross-device or cross-platform opportunities as well. Programmatic has allowed advertisers to normalize the view of an individual user across screens, and with that comes the ability to optimize campaigns in real time, across all screens and formats, Boccia said. He also noted that programmatic will play a vital role in bridging the digital/tv divide a task on everyone s minds and future strategies. Already, Boccia said he is seeing the rich behavioral and audience data found in lower-funnel programmatic activities being plugged back into the top of the funnel to inform TV buys and strategy. DigitasLBi s Bousquet said this practice will only grow as media buyers find it increasingly difficult to chase a consumer base migrating away from live TV viewership toward mobile- and time-shifted viewership. More than 50% of consumers are DVRing their content, she said. They want to tune in when they want to tune in, so we re looking at programmatic to understand how we can be as relevant as possible across all of these screens. And if a consumer does have her TV on a particular time, we re using that data to our advantage and putting the right message in front of her, whether that s on her TV screen or her ipad while she s co-viewing. Today, much of the industry s TV audience data comes from panels like Nielsen. Though a small subset is coming from IPTVs and set-top boxes, it remains minimal. But that hasn t stopped set-top box providers from trying to enter into the programmatic arena. Koran noted that Hulu, for example, tried to negotiate a programmatic upfront with Dish Network a couple of years ago. Though he said the test was unsuccessful, he felt the main failure came from the overall industry s lack of education about programmatic at the time and not the concept itself. Though many acknowledged that the industry is still years away from unlocking TV inventory programmatically, most largely agreed that ultimately, programmatic will be the de facto method of buying and executing such cross-device campaigns. We re not just thinking about programmatic in digital means, Bousquet said. We re also thinking about how we can have a conversation on television from a programmatic perspective or use it to be smarter in our mobile, our social, or video or our across-the-board digital approach. It all needs to be cross channel. Many are eager to see programmatic buying come to TV, but for now, challenges abound in automating TV buying and selling. One particular challenge is the lack of user-specific data currently available from broadcast TV buys. Unlike when we show it over IPTV [internet protocol television] and we can measure whether or not a person is still on a page or mousing around, TV is still a one-way broadcast, Turn s Koran said. That s changing with IPTV where you can better understand not just how many people saw the ad but what each individual actually did in response to that ad. PROGRAMMATIC GUARANTEED: MEANINGFUL MOMENTUM, DESPITE MURKY INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 12

13 UNDERSTANDING PROGRAMMATIC ADVERTISING IN THREE EASY STEPS Programmatic advertising, an automated, technology-driven method of buying and selling digital display ads, will account for $16.9 billion in US digital display ad spending by 2017, according to MAGNA GLOBAL. But in spite of significant industry interest in programmatic advertising, there is still significant confusion surrounding it. As of March 2014, more than half (55%) of US client-side marketers were either unclear on the definition of programmatic buying or unsure of how to apply it to campaigns, according to the Association of National Advertisers and Forrester Consulting. But programmatic advertising doesn t have to be so confusing. By asking three simple questions, professionals can unearth and understand the four main approaches to programmatic buying. YES Question 1: Is inventory being auctioned? NO Real-time Bidding (RTB) Programmatic Direct Question 2: Is it a public auction? Question 3: Is inventory guaranteed? YES NO YES NO Open Exchange Private Marketplace Programmatic Guaranteed Preferred Deal Real-Time Bidding: Auction-based approach used to buy or sell impression-level inventory. Auctions can either be public or private. Programmatic Direct: Nonauction-based approach that uses the same API technology as RTB or another publisher s API to buy or sell blocks of inventory, not individual impressions. These are prenegotiated deals that specify a fixed price and may or may not guarantee a fixed inventory amount. Open Exchange: Public RTB auction open to all buyers and sellers; also called an open auction, open exchange or open marketplace. Private Marketplace: Invitation-only RTB auction owned by a single publisher open to a select few buyers; also called a private exchange, private auction, closed auction or by its acronym, PMP. Programmatic Guaranteed: Upfront commitment to both CPM price and inventory amount secured via programmatic pipes between one buyer and one seller; also called programmatic reserved, forward market or just upfronts. Preferred Deal: Upfront commitment to inventory price but not inventory amount between one buyer and one seller; also called private access or first right of refusal. PROGRAMMATIC US TIME SPENT WITH GUARANTEED: MEDIA: THE MEANINGFUL COMPLETE EMARKETER MOMENTUM, FORECAST DESPITE FOR MURKY 2014 INDUSTRY DEFINITIONS 2014 EMARKETER INC. ALL RIGHTS RESERVED 131 real footer TK

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